assignment of debt nz

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This range of New Zealand debt documents provide for deeds of assignment, transfer of debt, forgiveness and collection.

Statutory demand form and notes: service on a company or LLP

Official statutory demand forms, examples and notes. Simple and effective debt collecting device. Complies with relevant New Zealand legislation.

recover debt from a company

How to recover a debt from a nz company, introduction.

The NZ COMPANIES ACT 1993 provides a quick procedure for ensuring payment, or at least of knowing if the payment is possible.

First, serve a "statutory demand" on the company

To recover money from a company you must serve a "statutory demand" for the debt. This demand must be in writing and should be served on the debtor company's registered office. The demand must require the company to pay the debt, or to secure the debt or settle it in some way.

The company has 15 working days after being served to comply with the notice.

What if the company disputes the debt?

If the company disputes the debt it has 10 days after being served with the statutory demand to apply to the court to have the demand set aside.

If the company does apply to have it set aside, the Court can decide at that hearing if the company should be liquidated.

What if the company hasn't paid after 15 days?

If the company hasn't paid the debt after 15 days, and it has not disputed the debt, then it is deemed unable to pay its debts, and you can therefore apply to the court for the company to be placed in liquidation.

If the company wishes to defend the liquidation, it has 14 days to file and serve a Statement of Defence.

You must advertise in the local newspaper and in the New Zealand Gazette that liquidation proceedings have been started, including the place, date and time set for the hearing. The advertisement must be published at least seven clear days before the hearing date.

The company can pay the debt any time up until the court hearing. However, costs would be paid to the party applying to place the company in liquidation.

Appointment of a liquidator

If the company's defence of your liquidation application is unsuccessful, or if it does not file a Statement of Defence, the court will appoint a liquidator to take control of the company and to try to satisfy its creditors. The liquidator must ensure that all moneys that are recoverable are in fact recovered and that the payments are made in order of preference (see the Cautionary Notes below).

For more on liquidation, see related article How to liquidate a company.

Order of preference for creditors

If you are attempting to recover a debt from a company, you should know where you are in the order of preference for creditors should the company be liquidated. The order is as follows:

• those owed wages, including holiday pay
• certain payments to the Inland Revenue Department (for example, PAYE)
• secured creditors
• unsecured creditors

Note that creditors are paid after the costs of the liquidation have been met.

Cautionary notes

• It is important to be aware of where you are in the order of preference for payments to creditors. If you are an unsecured creditor, and therefore last on the list, you should consider carefully whether it is worthwhile bringing legal proceedings to liquidate the company; it may be that bringing proceedings would lead to costs greater than the debt you are trying to recover.

recover a debt from an individual

How to recover a debt from an individual within new zealand, first, give notice of the debt.

To recover a debt from a New Zealand  individual you must first give the person notice of the debt owed, what it is owed for, and when payment is required. If the person does not pay the debt then you should proceed with court action.

Which court do I apply to recover the debt?

• If the amount is less than $15,000 and the debtor disputes the debt, you can apply to the Disputes Tribunal. The Disputes Tribunal can't be used to collect debts that the debtor doesn't dispute. If both you and the debtor agree, you can take amounts up to $20,000 to the Tribunal. (For the procedure in the Tribunal, see How to make a claim to the Disputes Tribunal.)
• Larger amounts up to $350,000 go to the District Court, with the right of appeal to the High Court, and after that the right of appeal to the Court of Appeal on a point of law.
• If the amount is over $350,000, then the initial Court is the High Court, with a right of appeal to the Court of Appeal.

How do I start proceedings in the court?

There are two procedures that can be used to obtain a court judgment for a debt:

• Standard procedure - This is begun by the creditor filing a Statement of Claim and a Notice of Proceeding. The debtor responds with a Statement of Defence and the case goes to a Court hearing.
• Summary Judgment - This is a faster and simpler procedure, available when the creditor believes that the debtor has no reasonable defence against the claim. The creditor files the same documents as with the standard procedure, plus an additional application and affidavit.

How much will it cost me to go to court?

Be aware that the costs of court action will include the court filing fees, other costs such as service fees (possibly up to $100), and solicitor's costs.

If you've used the summary judgment procedure and the debtor has not disputed your application, costs between $500 and $1,000 may be awarded by the court, and these will go towards your lawyer's fees when paid by the debtor.

What will I be awarded if the court decides in my favour?

If the judgment is in your favour then the court order will include the following:

• the original debt
• interest at either the rate agreed in the terms of trade, or at 7.5 percent (a standard rate set by legislation), or at some other rate that the court decides
• legal costs and disbursements associated with obtaining the judgment (these will not cover all your expenses)

How do I enforce the judgment if the debtor still doesn't pay?

If the debtor still does not pay after the court has given you a judgment for the debt, you can use the court to enforce payment of the debt. The most common methods of enforcement are:

• Order for Examination - This is a court order to have the debtor brought before the court Registrar and examined about his or her financial situation. If the Registrar decides the debtor can pay the debt, the Registrar will make an order for payment. Usually the Registrar will try to negotiate an arrangement for payment that suits both parties. The Registrar can also make a number of other enforcement orders (including the ones listed below).  
• Attachment Order - This instructs the debtor's employer to make regular deductions from the debtor's wages or salary (including bonuses and incentive payments). It can also order ACC or Work and Income to make deductions from ACC payments or welfare benefits. An Attachment Order can also be made against commissions and payments received as an independent contractor. An Attachment Order can't be made unless there has first been an Order for Examination  
• Distress Warrant (for personal property) - This authorises a Collections Officer from the court (a "bailiff") to seize goods from the debtor to the value of the debt. The seized goods are held for five days and then sold, usually by public auction.
• Charging Order and Writ of Sale (for land) - The registration of a charging order puts a stay on the debtor's property, preventing him or her from selling the property until the debt is satisfied; the property can be sold to satisfy the debt by a writ of sale.
• The court procedures for recovering debts are complex, and you may therefore need to obtain legal advice.
• If you've obtained judgment for the debt, note that you are responsible for pursuing the debt, not the court.
• Always be aware of the possibility that the individual may in fact be bankrupt or have no assets. In such a case it is best to seek legal advice in order to fully understand what is involved in enforcing the sale of the debtor's property in order to have the debt repaid. A bankruptcy notice and bankruptcy proceedings in the High Court is a separate set of court proceedings against the judgment debtor. The costs for such a court case in the High Court include filing fees, disbursements such as other service fees (which could be up to $150), and solicitor's costs calculated on an hourly basis. The other enforcement steps are also separate proceedings.

exercise a creditor's right of repossession

How to exercise a nz creditor's right to repossession.

In exercising a right of repossession as a New Zealand creditor you must comply with the requirements set out in the CREDIT (REPOSSESSION) ACT 1997 . The Act applies to all "credit agreements", which means hire-purchase agreements and other security instruments, such as chattel mortgages (secured loans) and security interests over motor vehicles.

The Act sets out the procedure for repossession and places restrictions on when and how you can repossess, but it does not in itself grant a right to repossess. Whether or not you have that right will be determined by the agreement itself.

Under the Act, you may not repossess unless:

• the debtor is in default under the credit agreement, or
• the goods are at risk of being removed, destroyed or damaged

Creditor must first send a pre-possession notice

Before you can take steps to repossess, you must first send the debtor a "pre-possession notice". This must be in writing; a standard form is set out in Schedule 1 of the CREDIT (REPOSSESSION) ACT 1997. The notice must:

• state the amount the debtor owes, and
• give the debtor at least 15 days to pay the amount owed

If you do not follow these requirements:

• you commit an offence and are liable for a fine of up to $3,000, and
• the debtor can apply to the court for relief (see related article How to protect a debtor's interest after repossession)

The notice must also be sent to any guarantors of the debt.

It is not necessary to send a pre-possession notice if you are repossessing because the goods are at risk.

When and how must the repossession be carried out?

The repossession must be carried out in a reasonable manner, and only between 6 am and 9 pm, Monday to Saturday. The debtor can, however, consent to the goods being repossessed outside those hours, provided the consent is given after the default in payment has occurred and before you or your agent arrive at the debtor's premises to take the goods.

The following documents must be produced when repossession takes place:

• The debtor must be given a copy of the pre-possession notice that was served on him or her.
• If your agent is repossessing the goods, he or she must produce evidence of authority to act as your agent.
• If the entry is during the prohibited hours, you or your agent must produce the debtor's written consent to this.

What if the debtor isn't home?

If the occupier of the premises isn't home when the entry takes place, you or your agent must leave a notice specifying:

• that the premises have been entered and the date of entry, and
• a list of any goods that have been taken

This notice must be accompanied by copies of the documents referred to above.

People who are disqualified from carrying out repossessions

Certain people are disqualified from carrying out repossessions, whether as agents or as the creditor:

• anyone who has been convicted in the last five years of a crime of violence or dishonesty
• anyone who has ever been sentenced to a prison term of 10 years or more, or to life imprisonment
• anyone who has been released from prison within the last year

Anyone who repossesses property in contravention of these restrictions commits an offence and is liable to a fine of up to $10,000.

Post-possession notice

Within 21 days after repossessing, you must send a "post-possession notice" to the debtor and any guarantors. The form for the notice is set out in Schedule 2 of the CREDIT (REPOSSESSION) ACT 1997. The notice states that the debtor is entitled to get back the repossessed property if, within 15 days of receiving the notice, the debtor either:

• "reinstates", which means to pay everything owed under the credit agreement, plus the costs of repossession and any storage costs, or
• "settles" the agreement, which means to completely pay off or finish the agreement

The notice must contain your estimate of the value of the goods.

If you don't send a post-possession notice, you are not entitled to recover the costs of repossession from the debtor or the guarantor.

Selling the goods

If the debtor hasn't reinstated or settled within 15 days of the post-possession notice, you may sell or dispose of the goods. You are under a positive duty to make reasonable efforts to obtain the best price.

Within 10 days after selling the goods, you must send the debtor a third notice (a "statement of account"), showing:

• the amount the goods sold for
• the costs and expenses of the sale
• the amount the debtor owed at the date of the sale
• whether there is money left over from the sale or whether the debtor still owes you money, depending on the amount the goods sold for

If there is money left over from the sale, the debtor has six months to begin court proceedings to recover the money from you.

• Especially if you run a repossession agency, it is important that you obtain advice from a lawyer so that you can ensure that your repossession practice complies with the legal requirements.
• Note that special rules apply if the repossession takes place 21 days before the debtor is adjudicated bankrupt.

recover a debt from a bankrupt

How to recover debt from a bankrupt within new zealand.

If a person who owes you money (a debtor) is adjudicated bankrupt under the NZ  INSOLVENCY ACT 1967 , you will need to work in conjunction with the Official Assignee to attempt to recover the money owed. It is the Official Assignee's role to sell the assets of the bankrupt estate and distribute the proceeds to the bankrupt's creditors.

Lodging your Proof of Debt form

If the bankrupt identifies you as a creditor, you will be notified of the bankruptcy and be sent a report outlining the bankrupt's financial position. (Bankruptcies are also advertised in local newspapers and in the New Zealand Gazette .) If payments are likely to be paid to creditors, a Proof of Debt form will be included with the report for you to complete.

It is in your best interests to complete the form correctly and include documents supporting your claim as soon as possible to avoid any later delays. This is because once the debtor is adjudicated as bankrupt the standard procedures available for recovering debt are prohibited (see How to recover a debt from a company and How to recover a debt from an individual).

If you do not receive the Proof of Debt form you should make the appropriate enquiries with the Insolvency and Trustee Service, which is part of the new Ministry of Economic Development.

What can I claim for?

The Insolvency and Trustee Service will also advise you as to what you may claim for. You may be unable to recover:

• debts incurred after the date of the bankruptcy
• interest accrued after the date of bankruptcy
• legal costs of debt recovery (unless this was provided for in your contract with the debtor)

What rights do I have as a creditor?

You as a creditor have certain rights that you are able to enforce, especially if you are concerned about your position. These are:

• the right to inspect certain documents relating to the bankruptcy (such as other Proof of Debt forms, the bankrupt's books of account and the minutes of any creditors' meetings)
• request a creditors' meeting
• inspect the Official Assignee's trust account for the bankrupt estate of which you are a creditor

In what order are the proceeds of the estate distributed?

Once the bankrupt's estate has been sold, there is an order of priority that the Official Assignee must follow when distributing the funds:

• the Official Assignee's fees and administration costs
• costs and expenses incurred by the creditor who petitioned the High Court for the adjudication of bankruptcy
• wages owing to the bankrupt's employees for the period up to four months immediately before the date of bankruptcy, and holiday pay (but there is a maximum pay-out of $6,000 for each employee)
• taxes that the Inland Revenue Department collects, such as GST and PAYE
• deferred creditors

All the money available for unsecured creditors (if any) is distributed proportionately and the debt is then discharged.

Can I appeal a decision made by the Official Assignee?

As a creditor you have the right to appeal to the High Court against a decision made by the Official Assignee.

Obtaining information on bankruptcies: the National Insolvency Database

The Ministry of Economic Development has established a National Insolvency Database that each office of the Insolvency and Trustees Service has access to. Through this you can search for:

• the bankrupt's name
• the bankrupt's address
• the bankrupt's occupation
• the date and place of bankruptcy
• the time and details of the bankrupt being discharged from bankruptcy (there is an automatic discharge after three years, although the bankrupt can seek a court order to be discharged earlier)

You can also access and search this database through the Ministry's website

The New Zealand Government website Insolvency is an additional useful guide.  Cautionary notes

• A bankrupt is usually discharged after three years but you may lodge an objection to this in the High Court. It is advisable to consult a lawyer, who can advise you as to the likely success of doing this.

Deed of assignment of debt

A deed of assignment is used to transfer the right to be paid a debt from one person to another. Complies with relevant New Zealand legislation.

Deed of assignment of debt with consent

Transfer of debt.

A deed that provides for one person to take over a debt owed by another, with the consent of the creditor, so that the debtor/ creditor relationship is replaced and the debt is owing between the creditor and replacement debtor. Complies with relevant New Zealand legislation.

Full forgiveness of debt

A deed to record a Gift by way of forgiveness of part of a debt owing from one person to another where the maker of the Gift has natural love and affection for the recipient. Complies with relevant New Zealand legislation.

Partial forgiveness of debt

Final release of balance of debt, novation agreement: transfer debt to new creditor.

Transfer the right to receive a debt repayment from creditor to his transferee. Complies with relevant New Zealand legislation.

Novation agreement: transfer debt to new debtor

Transfer a debt obligation from one party to another with the creditor's permission, for example when restructuring debt or when selling a business and its obligations. Complies with relevant New Zealand legislation.

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50 How thing in action assigned

The absolute assignment in writing of a legal or equitable thing in action, signed by the assignor, passes to the assignee—

all the rights of the assignor in relation to the thing in action; and

all the remedies of the assignor in relation to the thing in action; and

the power to give a good discharge to the debtor.

Subsection (1) applies whether or not the assignment is given for valuable consideration.

Subsection (1) applies subject to—

section 51 ; and

any equities in relation to the thing in action that arise before the debtor has actual notice of the assignment and would, but for subsection (1), have priority over the rights of the assignee.

The priority of an assignment to which subsection (1) applies and which is not given for valuable consideration is to be determined as if the assignment had been given for valuable consideration.

A legal or equitable thing in action is to be treated as having been assigned in equity (whether the assignment is oral or in writing) if—

the assignee has given valuable consideration for the assignment; or

the assignment is complete.

Subsection (5)—

prevails over any rule of equity to the contrary; but

applies subject to sections 24 and 25 .

An assignment to which subsection (5) applies is complete when the assignor has done everything that needs to be done by the assignor to transfer to the assignee (whether absolutely, conditionally, or by way of charge) the rights of the assignor in relation to the thing in action.

Subsection (7) applies even though some other thing may remain to be done, without the intervention or assistance of the assignor, in order to confer title to the rights on the assignee.

Compare: 1952 No 51 s 130

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Ministry of Justice

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• About civil debt

About Civil Debt

When the court makes a decision about a private disagreement over money or property, it becomes a civil debt. The court decision is known as an order or judgment and tells one party (the debtor) that they must pay the other (the creditor).

Creditors can ask the court to help them collect the debt if the debtor does not pay. This is called civil enforcement. The creditor may have to pay fees; usually the fees can be added to the debt.

Collecting your debt: information for civil creditors

You can ask the court to help you collect your civil debt if the debtor does not pay. This is called civil enforcement. You may have to pay fees.

Managing your debt: information for civil debtors

The creditor can ask the court to take action against you to encourage you to pay your debt. This is called civil enforcement. Find out what the court can do and what your options are.

• Civil enforcement fees

Civil enforcement fees have to be paid when you file an application. To apply for enforcement against more than one debtor, the creditor must file an application form & pay fees for each debtor.

• Civil enforcement forms

Civil enforcement application forms for creditors, debtors and third parties.

Learn about taking a civil debt to court

Civil enforcement happens after the court has made a civil order or judgment. If you have a disagreement about money and want to take someone to court, you can learn more on the courts and tribunals section of our website.

This page was last updated: 26th June 2023

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Debt Assignment: How They Work, Considerations and Benefits

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

Investopedia / Ryan Oakley

What Is Debt Assignment?

The term debt assignment refers to a transfer of debt, and all the associated rights and obligations, from a creditor to a third party. The assignment is a legal transfer to the other party, who then becomes the owner of the debt . In most cases, a debt assignment is issued to a debt collector who then assumes responsibility to collect the debt.

Key Takeaways

• Debt assignment is a transfer of debt, and all the associated rights and obligations, from a creditor to a third party (often a debt collector).
• The company assigning the debt may do so to improve its liquidity and/or to reduce its risk exposure.
• The debtor must be notified when a debt is assigned so they know who to make payments to and where to send them.
• Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA), a federal law overseen by the Federal Trade Commission (FTC).

How Debt Assignments Work

When a creditor lends an individual or business money, it does so with the confidence that the capital it lends out—as well as the interest payments charged for the privilege—is repaid in a timely fashion. The lender , or the extender of credit , will wait to recoup all the money owed according to the conditions and timeframe laid out in the contract.

In certain circumstances, the lender may decide it no longer wants to be responsible for servicing the loan and opt to sell the debt to a third party instead. Should that happen, a Notice of Assignment (NOA) is sent out to the debtor , the recipient of the loan, informing them that somebody else is now responsible for collecting any outstanding amount. This is referred to as a debt assignment.

The debtor must be notified when a debt is assigned to a third party so that they know who to make payments to and where to send them. If the debtor sends payments to the old creditor after the debt has been assigned, it is likely that the payments will not be accepted. This could cause the debtor to unintentionally default.

When a debtor receives such a notice, it's also generally a good idea for them to verify that the new creditor has recorded the correct total balance and monthly payment for the debt owed. In some cases, the new owner of the debt might even want to propose changes to the original terms of the loan. Should this path be pursued, the creditor is obligated to immediately notify the debtor and give them adequate time to respond.

The debtor still maintains the same legal rights and protections held with the original creditor after a debt assignment.

Special Considerations

Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA). The FDCPA, a federal law overseen by the Federal Trade Commission (FTC), restricts the means and methods by which third-party debt collectors can contact debtors, the time of day they can make contact, and the number of times they are allowed to call debtors.

If the FDCPA is violated, a debtor may be able to file suit against the debt collection company and the individual debt collector for damages and attorney fees within one year. The terms of the FDCPA are available for review on the FTC's website .

Benefits of Debt Assignment

There are several reasons why a creditor may decide to assign its debt to someone else. This option is often exercised to improve liquidity  and/or to reduce risk exposure. A lender may be urgently in need of a quick injection of capital. Alternatively, it might have accumulated lots of high-risk loans and be wary that many of them could default . In cases like these, creditors may be willing to get rid of them swiftly for pennies on the dollar if it means improving their financial outlook and appeasing worried investors. At other times, the creditor may decide the debt is too old to waste its resources on collections, or selling or assigning it to a third party to pick up the collection activity. In these instances, a company would not assign their debt to a third party.

Criticism of Debt Assignment

The process of assigning debt has drawn a fair bit of criticism, especially over the past few decades. Debt buyers have been accused of engaging in all kinds of unethical practices to get paid, including issuing threats and regularly harassing debtors. In some cases, they have also been charged with chasing up debts that have already been settled.

Federal Trade Commission. " Fair Debt Collection Practices Act ." Accessed June 29, 2021.

Federal Trade Commission. " Debt Collection FAQs ." Accessed June 29, 2021.

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What is the Difference Between Assignment and Novation?

Assignment of contracts is a fairly common practice in the business world.  

In an assignment, the person assigning the contract - the "Assignor" - assigns the benefits of the contract the Assignor holds to a new person (the "Assignee") who takes the benefit of that contract "the Assignee". Some contracts may expressly prohibit assignment and some contracts provide that a contract may not be assigned without the consent of the other party. If a contract has no provision relating to assignment, then the general rule is that it may be assigned, with a few exceptions. 1

Usually, a contractual party will want to ensure that if a contract is assigned, then the Assignee has sufficient skill and financial backing to continue to perform the contract and, if this is the case, it is important to make sure an assignment provision in a contract takes account of that so consent can be withheld if an Assignee does not fulfil those criteria.

Critically, in an assignment, the general law states that the Assignee takes the benefit but not the burden of the contract.  

This means that if the Assignee does not perform the contract, the Assignor remains liable. This can sometimes leave the other contractual party with a remedy if the Assignee is insolvent and does not perform. 2  However, as noted earlier, the best way of dealing with an assignment request is to complete due diligence on the Assignee, since it may be that if you later need to make a demand on the Assignor (particularly if they are a company), the Assignor may no longer be able to meet that demand under the assigned contract if the Asignee fails to perform it. For example, a company selling its business to an Assignee may liquidate following the sale (after paying all creditors at that time and returning a final dividend to shareholders), which makes it very difficult to make any later claim against it if the Assignee does not perform the contract.

An assignment is fundamentally different from a novation. In a novation, a new contract is entered into between the new party (the "Novatee") and the other continuing contracting party/parties and the original party (the "Novator") is released from all of their obligations (usually from the date the novation takes effect). For this reason, a novation poses a greater risk to the continuing contract party or parties than an assignment since they have no recourse against the Novator if the Novatee fails to perform the contract. If someone makes a request to you for novation, you should treat the request very seriously. You should consider obtaining consideration for the consent or some form of guarantee and will need to complete very rigorous due diligence on the new party to make sure they can perform the contract. You should also check when you enter into a new contract with anyone that the contract does not allow the other party to novate the contract, particularly without your consent and a rigorous agreed process in place for that consent to allow you to assure yourself the party that takes novation can perform the contract.

Assignment and novation can be a tricky area of law. As always, if you have an issue with assignment or novation or encounter an unusual clause in a new contract concerning assignment or novation, you should take legal advice – we are happy to help!

For any enquiries contact:

Andrew Knight on (09) 306 6730 ( [email protected] )

See our Expertise pages

‍ Contract Law

____________________________

1    Exceptions include "personal" contracts where the particular skill, identity or characteristics of a party are fundamental to the contract. Bare rights of litigation are also not assignable.

2     Note that Section 241 of the Property Law Act 2007 has special provisions in respect of leases that make assignors liable for payment of rent and obligation under the lease, but not for increased obligations the assignee and landlord might agree to on a variation of lease unless the lease provided for that variation.

© McVeagh Fleming 2020

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.

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Deed of Debt

Record a loan of money or assets to protect yourself in the future..

A Deed of Debt (also known as a “Deed of Acknowledgement of Debt”) is a great way to formalise a loan of money or assets to another person. A Deed of Debt is particularly useful for recording a loan between parents and children for the purpose of purchasing a home.

Get an online Deed of Debt with Agreeable, and you’ll have a strong reference point to return to in the future. Once you’ve filled out our short questionnaire, our Agreeable team can help you edit the Deed to fully reflect your intentions.

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What is a deed of debt.

A Deed of Debt is a document for recording a loan from one person to another. The Deed helps make it clear that the person receiving the loan must pay back the money or return the property at a chosen time.

The person who loans money or property is called the Creditor, and the person who receives the loan is called the Debtor. Deeds of Debt are particularly useful when someone loans money or property to a trust or where parents help one of their children purchase their first home by loaning them money for their deposit. These types of agreements are most effective when the lending party does not intend to recover interest on the loan.

Do I need a Deed of Debt?

A Deed of Debt allows parties to document a loan. A Deed of Debt records who is involved, the amount being transferred, whether the loan is interest free, and how the loan is to be repaid.

In our experience, a Deed of Debt is an important tool where parents are wanting to help their adult child, often either married or de-facto, purchase a family home. A Deed of Debt will record the loan to the child. The Deed of Debt can then function as an effective record of the loan for any future relationship property or separation agreement between the child and their partner.

Where parents help their child purchase a home and the child is in a relationship, we recommend seeking a relationship property agreement to protect that child’s equity (and debt) by reference to the loan from his or her parents.

What are the benefits of a Deed of Debt?

If someone refuses to repay money that you have loaned to them, having a valid, enforceable legal document can make recovering a loan easier.

Things to keep in mind when getting a Deed of Debt

It is important to ensure that you fully identify the people involved, and who is giving and receiving the loan. The amount to be repaid is also crucial.

Anyone entering into a Deed of Debt should always be aware of any tax or financial consequences that may follow (for example, whether interest applies and how it is to be repaid). We recommend that you seek legal and tax advice before entering into a Deed of Debt. Agreeable would be happy to help connect you with a lawyer who could provide that advice.

We look forward to working with you!

If you’re ready to work some magic and start drafting your own Deed of Debt, get started ! If you have any questions about how the process works, feel free to give us a call on 0800 9 AGREE.

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Home | Browse Topics | Consumer rights & money | Credit and debt | Disputing that you owe a debt

• Consumer rights & money

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Credit and debt

• Consumer protection

• Debt recovery and enforcement
• Your rights and obligations when you borrow money
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Disputing that you owe a debt

• Credit reports
• Debt recovery by a debt collection agency
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• Repossession
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• Challenging an unfair credit contract through the courts
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What can I do if I disagree that I owe the money?

You should tell the lender or debt collection agency as soon as possible that you dispute the debt and tell them why. Do this in writing and keep a copy of the letter.

If the debt is $30,000 or less, you can take a claim to the Disputes Tribunal, where you ask them to make an order that you don’t owe the disputed amount (see: “ The Disputes Tribunal ”).

All lenders who use credit contracts must be registered as financial service providers and be members of an approved dispute resolution scheme. Therefore, if the disputed debt arises out of a credit contract, you can complain to the dispute resolution scheme the lender belongs to (see: “ Other legal protections when you get credit ”).

If you simply do nothing, the lender might take enforcement action against you.

If you dispute the debt, the lender or debt collection agency might:

• negotiate with you about the debt, or
• take court action to recover the debt (see: “ How are debts recovered through the courts? ”).

If you need help, get support from your local budget advice service (see: “ Where to go for more support ” at the bottom of this page).

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Where to go for more support

Legal information and support groups

Community Law

Your local Community Law Centre can provide you with free initial legal advice.

Consumer Protection

The Consumer Protection website has useful information on a range of consumer topics. Consumer Protection is part of the Ministry of Business, Innovation, and Employment (MBIE).

Consumer NZ

The Consumer NZ website provides a wide range of information on consumer issues and template letters you can use to write to traders to enforce your rights.

Website: www.consumer.org.nz Email:   [email protected] Phone: 0800 226 786 (0800 CONSUMER)

Commerce Commission

The Commerce Commission enforces the laws against misleading and deceptive conduct by traders (the Fair Trading Act) and the consumer credit legislation (the Credit Contracts and Consumer Finance Act). The Commission provides information on these areas on its website.

Website: www.comcom.govt.nz Email: [email protected] Phone: 0800 943 600

To make a complaint online: comcom.govt.nz/make-a-complaint

Citizens Advice Bureau (CAB)

CAB provides free, confidential and independent information and advice. See CAB’s website for valuable information on a range of topics.

Website: www.cab.org.nz Phone: 0800 367 222 Facebook:   www.facebook.com/citizensadvicenz

FinCap and Money Talks

FinCap is a non-government organisation providing free financial mentoring services.

Website: www.fincap.org.nz Email: [email protected] Phone: 04 471 1420

MoneyTalks is a financial capability helpline operated by FinCap. The Financial Mentors offer free, confidential advice by phone, text, email and live chat.

Insolvency and Trustee Service (ITS)

The ITS deals with bankruptcies, no-asset procedures, summary instalment orders and some company liquidations. Information about those processes is available on its website. The ITS is part of the Ministry of Business, Innovation and Employment (MBIE).

Website: www.insolvency.govt.nz Phone: 0508 INSOLVENCY (0508 467 658)

Dispute Resolution Schemes

There are four dispute resolution schemes for consumers dealing with lenders and other credit providers. Contact the scheme your service provider has registered with.

1. Financial Services Complaints

Website: fscl.org.nz Phone: 0800 347 257

2. Insurance & Financial Services Ombudsman

Website: www.ifso.nz Phone: 0800 888 202

3. Banking Ombudsman

Website: www.bankomb.org.nz Phone: 0800 805 950

4. Financial Dispute Resolution Service

Credit Reporting

Your credit record

There are three credit reporting companies that operate nationally in New Zealand. To check your record or correct any information, you’ll need to contact them all.

You’re entitled to a free copy of your credit record. You should make sure you choose the free option when you contact each company.

1. Centrix – www.centrix.co.nz – 0800 236 874 2. Illion – www.illion.co.nz – 0800 733 707 3. Equifax – www.equifax.co.nz – 0800 698 332

Personal Properties Securities Register (PPSR)

Search the PPSR register to see if there is any security interest registered against a vehicle. This can be done for a small fee by registering to check online.

Website: www.ppsr.companiesoffice.govt.nz

Privacy Commissioner

The Privacy Commissioner has information on your rights in relation to credit reporting and how to complain if you feel your rights have been breached.

Website: www.privacy.org.nz Email: [email protected] Phone: 0800 803 909

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What happens to your debt when you die?

Does your debt disappear when you die, or are your family obliged to pay your debts when you pass away?

Generally all of your debt – mortgages, credit card debts and car loans – will need to be paid back when you die.

The executor you appoint in your will to act for your estate will sell sufficient of your assets to pay all of your debts.

For bank mortgages over your land, the executor of your will uses the assets in your estate to pay off the mortgage. If there is enough money within your estate to pay off the mortgage, the executor may distribute the property which is mortgaged to the beneficiaries of your will , depending on the instructions in your will. A mortgage could also be paid out from proceeds of a life insurance policy.

If your estate can’t pay off the mortgage and the beneficiaries can’t afford to do so either, then the executors of your will have to sell the property, pay off the debt using the proceeds of the sale and distribute the balance according to the instructions in your will.

Will your executor or beneficiaries have to pay any unpaid debts?

Your executor and beneficiaries are not responsible for debts that cannot be paid by your estate. If someone else has co-signed on a credit card debt or loan, they will be liable to pay it off even after your death.

‘Authorised users’ on credit cards are not responsible for paying the card holder’s outstanding debts.

If you co-own a property with someone as a “Joint Tenant” rather than as a tenants in common, then the surviving Joint Tenant/s acquire the whole property automatically independent of your will because the property held in joint tenancy does not form part of the estate of the tenant who dies.

If my estate can’t pay off my debts, what happens?

If there are not enough assets or money in the estate to pay all of your debt, then the remaining debts are not required to be paid by your executor, relatives or beneficiaries.

If collection agencies still contact relatives about paying these debts, they should consult a lawyer.

If you have a question regarding what could happen with your own estate, or are working through the estate of a relative, please contact our estates team for further information and advice.

Our thanks to Tony Savage for writing this article

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Assigning A Lease – How A Deed Of Assignment Works

When you’re entering or leaving a business premise as a tenant in New Zealand, it’s crucial to check if you need to transfer a lease. In other words, if the ownership of the business is changing, you need to make this official with your tenant. 

This is known as ‘assigning a lease’ or ‘transferring a lease’. It occurs when you’re selling your business and the buyer agrees to be bound by the existing lease, or you’ve decided to move premises and have found another business willing to take over your current lease.

Essentially, when you assign your lease, you’ll be handing over the rights and obligations of that lease to another party . It’s important to ensure you’re not left liable for any part of the old lease! 

This is also known as a Deed of Assignment , which we’ve written about in more detail here . 

The Process Of Transferring A Lease

Transferring a lease in New Zealand doesn’t have to be a complicated process. Let’s simplify it. 

1. Review The Existing Lease

Firstly, you’ll need to check that there aren’t any conditions in the lease that would prevent it from being transferred. Review the terms of your lease carefully, and consider consulting a lawyer to assist with this step! 

2. Landlord’s Consent

Once you’ve confirmed that the lease can be assigned, you’ll need the landlord’s written consent and understand any requirements for the transfer. Each landlord may have different stipulations, so clear communication is key. 

3. Discuss The Assignee

Next, discuss with your landlord who will be taking over the lease, known as the incoming tenant. Gather their name, contact details, and any relevant documents needed for the transfer, such as evidence of their financial standing or business experience. 

Following this, the landlord confirms their consent to the transfer, and the incoming tenant agrees to it. This is formalised in a Deed of Consent to Assignment . 

The assignee will then agree to take on the rights under the existing lease from a specified date until the lease term concludes. 

All parties should review the terms of the Agreement to ensure they are satisfied with their obligations and the rights or interests they will hold in the lease. 

I’m The Outgoing Tenant – What Else Should I Do?

With the landlord’s consent in place, you can proceed with creating a Deed of Transfer of Lease.

This document will officially release you from any responsibilities or liabilities under the lease. However, until this is formalised, continue to fulfil your lease obligations. 

Retail Leases

If you’re transferring a retail lease, the steps you need to take in New Zealand may differ. It’s advisable to review the Commercial Tenancies Act 1991 , which governs retail leases. 

Considerations may include:

• Under a retail lease, providing evidence of the incoming tenant’s financial reliability can help in obtaining the landlord’s consent.
• If the incoming tenant lacks financial credibility, the landlord is not obliged to consent to the transfer.

Understanding your rights and obligations under the type of lease you hold is essential. More information about transferring leases can be found here . 

If you need a lease drafted or reviewed, we’re here to assist! Contact our friendly team on 0800 002 184 or [email protected] for a free, no-obligation consultation about your specific situation and the legal documents that suit your needs.

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• 4 April 2020

Debt recovery and enforcement methods - What options do you have if a customer fails to pay their bills?

Do you need help in recovering a debt clients often ask what options they have to recovery money owed by an individual or a business. this article outlines what options are available to you if you need to recover a debt..

If a company, other entity or person owes you money, you are creditor. The person owing you the money is a debtor.  As a creditor, whether you are a business or an individual, there are various legal remedies available to you for recovering a debt owing to you where a debtor cannot or will not pay.

Before you can exercise any remedies, you must establish that you have a claim against the debtor.  For example, you must be able to show that there was an agreement between the parties to supply a service or a product in return for a payment of those services or products.  Where the amount in claim is ascertained during the formation of the contract, this is considered a claim in liquidated damages.

Alternatively, you may have an unliquidated claim for damages.  For example, you may have a claim in contract for lost profits as a result of a breach of contract.  In this circumstance, the amount owing cannot be ascertained by a simple calculation, and a judicial hearing is usually required.

It is not uncommon, where a debtor fails to pay, for a creditor to have sent reminder letters and final warning notices putting the debtor on notice that they will take further action, but what happens next if the debtor ignores these notices, refuses to pay or denies it owes the debt?

Starting Point

Demand Letter

Where a debtor owes you money, a good place to start is by formally demanding payment by way of a demand letter.  A demand letter will briefly set out why you are entitled to payment and demand payment to be made by a certain date.  A well composed demand letter may prompt a response and sometimes a settlement proposal, as a debtor may perceive that you are prepared to take the matter further and that the debtor may incur further legal costs if they do not pay what they owe.  If the debtor disputes the debt after receiving the demand, this may assist you in making a decision about what method of recovery to use.

Statutory Demand

If the debtor is a company, a legal demand in the form of a “statutory demand” may be issued against the debtor company.  The requirements for a statutory demand are set out in section 289 of the Companies Act 1993.

A statutory demand must be in writing and served on a company where there is no dispute over the debt and the debt is greater than $1,000. A statutory demand is a useful tool in a creditor’s arsenal and may prompt payment from a debtor.  However, a statutory demand is intended to be the first step in putting a company into liquidation and should be used to prove insolvency of a company rather than as a means to collect outstanding money.

The use of statutory demands are a common and effective way of prompting payment from a debtor, but proper care must be exercised to ensure that it is issued and served in accordance with the requirements of the Companies Act 1993.

Commencing Proceedings

If a demand letter or a statutory demand does not prompt payment or settlement discussions, you will need to consider whether to seek judgment against a debtor by issuing proceedings in the appropriate forum.  There are three potential forums in which you can seek judgment: the Disputes Tribunal, the District Court and the High Court.

Before issuing proceedings, you will need to consider the implications, such as costs to do so and the ability of the debtor to satisfy the judgment (that is, does the debtor have any assets to pay the debt?)  Alternatively, you may decide that issuing proceedings is the best way to put pressure on the debtor to pay, to avoid the further cost of litigation, the stigma of having a judgment against the debtor’s name and the impending threat of bankruptcy or liquidation.

Disputes Tribunal

Where the debt is disputed (and only when it is disputed), legal action can be taken to recover a debt in the Disputes Tribunal.  The Disputes Tribunal hears claims up to the value of $30,000.  The Tribunal offers a more informal setting with Referees presiding as decision makers rather than Judges.  Parties must represent themselves and cannot be represented by lawyers at the Tribunal.  However, lawyers may assist with applications to the Tribunal and with preparation for the hearing.  Just like a Court Order, a decision made by Referee is called an “Order” and it will set out what the parties need to do and when it must be done.  A Tribunal Order is legally binding and must be followed.

District Court and High Court Proceedings

A District Court has the jurisdiction to determine any proceeding where the debt is not more than $350,000.  Any proceeding in respect of a debt in excess of $350,000 must be commenced in the High Court.  The High Court also determines bankruptcy and liquidation proceedings.

To recover debts through the District Court, general proceedings are commenced by filing a statement of claim, notice of proceeding and a list of documents relied on.  The person commencing the proceedings is the plaintiff.  Once these documents are filed with the Court, they are served on the other party (known as the defendant) who has 25 working days to file a statement of defence.  If a statement of defence is not filed, and where the claim is for unliquidated damages, the plaintiff may apply for a judgment by default.

There are other applications that may be made to the District Court, for example, an interlocutory application for summary judgment.  This can be used as a “fast-track” approach for obtaining a judgment without the need for a trial.  A summary judgment application is made in instances where the plaintiff asks the Court to grant judgment without trial because the defendant has no lawful defence.

Time limits

There are limits on how long you have to issue proceedings after the relevant event or debt arose.  Generally, you must bring a claim within six years from the time of the event that the claim is based on.  There are some exceptions to this rule and these are set out in the Limitation Act 2010.

Enforcing the Judgment 

Once you have successfully obtained a judgment, you can apply for an order to enforce the judgment.  The different methods of enforcement in the District Court include:

• Attachment order
• Charging order

Warrant to seize property

• Garnishee order

Where it is unknown what assets the debtor holds, a financial assessment hearing is usually used as a first step to establish the debtor’s financial circumstances.  At a financial assessment hearing, the debtor must make a declaration under oath outlining exactly what assets and debts they have, what they earn and the amount they can pay in instalments to repay the debt.  Where the debtor is a company, then the relevant company officer is required to attend.  You can also attend to examine and question the debtor on their finances.  During a financial assessment hearing, a Court may also make an attachment order to enforce a judgment.  If a debtor fails to attend, a warrant for their arrest may be issued.

Attachment order 

An attachment order is designed to secure your right to the debtor’s earnings by requiring their employer to deduct money directly from the debtor’s salary or wages.  Deductions can also be made from pensions, WINZ benefits and ACC payments.  However, no more than 40% of the debtor’s net income can be deducted and both parties need to agree on how much can be deducted and how frequently the payments will be made.

Charging orders

You may also be able to obtain a charging order against the debtor’s assets (for example, land or personal property) which prevents the debtor from disposing of the assets that are identified in the order, until the debtor pays the judgment.  A charging order operates as a “stop order”, preventing or restricting a debtor from dealing with or selling property.  If the debtor owns land, a charging order allows for a caveat to be lodged against the title.

A warrant to seize property enables a bailiff appointed by the Court to enter the premises of a debtor to seize their money or goods.  The goods seized may then be sold to satisfy the judgment.  The bailiff is authorized to seize goods of the debtor except for their:

• Tools of trade to a value not exceeding $5,000; and
• Necessary household furniture and effects, including clothing for the debtor and their family, to a value not exceeding $10,000.

If, after seizure and the debtor has not paid within five working days, the bailiff may sell the goods at public auction and the proceeds of the sale will be paid towards the judgment sum owing.  A bailiff can also immobilise any motor vehicle belonging to the debtor, pending payment of the debt.

This procedure is only available in the High Court.  However, you may be able to apply to have a judgment transferred from the District Court to the High Court.  As with a warrant to seize property, a sale order authorizes a bailiff to seize and sell property, and there are similar limitations to what can be sold, that is, a debtor is entitled to keep tools of trade and necessary household furniture.

Garnishee Order

A garnishee order enables you to recover the judgment sum from any debts owing to the judgment debtor by a third party.  The court can make a garnishee order requiring the third party to pay money directly to you, for example, a bank may be ordered to pay money directly to you if there is money held in a debtor’s bank account.  You may become aware of the debt owed by a third party at a financial assessment hearing, this is why a financial assessment hearing may be a useful first step to ascertain the debtor’s financial position.

This article is only intended to provide a brief overview of the procedure for pursuing claims and enforcing judgments in the respective jurisdictions.  Drafting court documents and appearing in court can be a complex, time consuming and confusing exercise for those not familiar with court processes.  It is advisable (and often cost effective) to consult your legal advisor for advice before deciding what debt recovery option to take.  If you are successful, costs such as legal fees and disbursements (filing fees and service fees) may be awarded against the unsuccessful party so that can help you cover the costs of obtaining legal advice.

If you have any queries about your debt recovery or enforcement options, please contact one of our team for advice.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

For further information

Sarah Rawcliffe

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Deed of assignment of debt Deed of assignment of debt

A deed of assignment is used to transfer the right to be paid a debt from one person to another. Complies with relevant New Zealand legislation.

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Assigning or subleasing – what is the difference?

The terms assigning and subleasing are often used in a commercial leasing context, to refer to when a tenant transfers their rights under a commercial lease to another party. 

Assigning a Lease

A tenant may want to sell their business or move to other premises, but if their lease has not come up for expiry yet, they will not be able to terminate it.  Instead, they might need to assign their lease to the party who buys the business, or to a new tenant.

Landlord’s consent

Assigning a lease requires the landlord’s written consent.  A landlord is likely to want to know (and is entitled to know) all about the new tenant including their financial situation, the nature of their business, and conduct reference checks. 

Although they can conduct thorough due diligence on a prospective tenant, the landlord cannot unreasonably withhold their consent, nor can they ask for any extra payment in order to give their consent.  To formalise the assignment, a written Deed of Assignment of Lease needs to be completed and signed by all parties including the landlord. 

Original tenant’s liability

On a day-to-day basis the new tenant takes on all of the lease obligations.  However, the original tenant (and any guarantors to the lease) will remain liable under the terms of the lease until such time as it is terminated, varied, or renewed beyond the original renewal rights. This means that should the new tenant fail to meet any of their obligations (for example if they get behind in their rent payments), the landlord could come after the original tenant and/or their guarantors.

A sublease differs from an assignment of lease in that the original tenant (the “head tenant”) continues to be responsible for all of the lease obligations, but a subtenant is occupying the premises and paying a contribution towards the rent. 

Subleasing is common where a head tenant is not using all of their leased premises, and wants to make some additional money by subleasing a portion of the leased premises to a third party without giving up their own lease (the “head lease”) altogether.  By way of a Deed of Sublease, a subtenant agrees to pay rent for part of the premises, often a specific portion of a total area marked out on a floor plan, directly to the head tenant.

A head lease will often specify that the landlord’s consent to a sublease is needed.  If the subtenant is going to use the premises for a business use that differs from the head tenant’s as recorded in the head lease, then that new use must be disclosed to the landlord as part of obtaining their consent, and recorded in the Deed of Sublease as a variation of the head lease terms.

Head tenant’s liability

The head tenant remains liable to the landlord for the entire premises, even if a portion of that has been subleased.

The subtenant must comply with the terms of the head lease as well as their own sublease arrangement, so it is essential that they receive a copy of the head lease at the outset.  A subtenant should not sign a subleasing agreement without having reviewed the head lease first, otherwise they may find themselves with obligations they cannot fulfill.

Alan Knowsley  Partner Wellington

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Combine your debts into a debt management plan.

You may be able to combine all your debts into what's called a Debt Management Plan or Creditors’ Pool. You make repayments into this plan, and your creditors are paid from it.

Your local Budget Advisory Service or Community Law Office can help you do this, or you could talk to someone like a lawyer, accountant, or insolvency specialist.

Enter into a proposal

A proposal is a formal agreement between you and your creditors about how and when they'll be paid. It needs to be approved by the court, but you don't have to involve the Official Assignee (unlike the formal insolvency options). Once it's approved, the creditors included in it can't chase you for their debts without the court’s permission.

You'll need help from a lawyer or accountant to draft the agreement. Once your creditors have agreed to it, you'll need to have it approved by the court.

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Consider a debt management plan or a proposal.

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